Aleksei Shukletsov, Executive Director, MSCC Bronka

On measures required for development of port infrastructure in the Baltic Basin

- The development of Russia’s port infrastructure (just like transport infrastructure in general) is more and more influenced by political and geopolitical processes. The rates of those processes continue accelerating. It is neither bad nor good – it is an objective reality, whether we like it or not.

Key factors influencing the development of port infrastructure in Russia are the following: the necessity to develop Russian Arctic, the implications of the sanctions, the declared “eastward pivot” in the foreign trade, the necessity of diversification in foreign trade markets, the redirection of Russia’s foreign trade cargo from the ports of the Baltic States to Russian ports in the Gulf of Finland, phasing out of Russian foreign trade cargo transit via the ports of Ukraine.

In the nearest time the list of those factors will be expanded with the Chinese initiative “One Belt, One Road".

Virtually all these factors are associated with the processes mentioned above.

The rates of political and geopolitical processes continue accelerating. At the same time, trend movement in the development of port infrastructure is a slow-response process. So, the rate of response to new external realities is, unfortunately, increasing. Improved forecast of the developments becomes especially important in this situation. And we are not good at this.

Until now, extrapolation of the established statistic patterns for subsequent periods has been the main methodological principle of industry-focused forecasting. Although this method can be somehow justified in periods of smooth progressive development, it obviously does not work in periods of crises and global sea change.

Of course, improving the methodology of industry-focused forecasting is the task of scientists, but it is clear that the forecast itself should evolve towards greater consideration of political and geopolitical implications on the changing environment where freight transportation is performed as well as scenario-based forecasts (it is not only about today's triads of the innovative - moderately optimistic - conservative or optimistic - realistic - pessimistic forecasts but about scenario development of the external situation) and more realistic forecast horizon (none of serious experts or specialists will dare forecasting for more than 3-5 years in the dynamically changing world of today).

To a large extent, the needs for future development of Russian port infrastructure depend on the future of the three integration processes in which Russia is involved, or which are developing directly at its borders (the European Union, the Euro-Asian Economic Union and the One Belt, One Road).

In this context, I would like to highlight that the Chinese initiative "One Belt, One Road” OBOR, which is commonly referred to as the "Silk Road" and for some reason is interpreted as a kind of purely transport and transit project aimed to connect China and Europe by land, as a sort of alternative to the current maritime route for delivering goods from China to Europe, is actually a global integration project intended for creation of a common Eurasian economic space in which China plays a backbone role (thus, this space will be a market for Chinese goods, equipment, construction and transport companies).

Therefore, the OBOR initiative is not mainly about redirection of today's transit cargo flows of Chinese goods, but about the prospects of cargo flows that will be increasingly generated while this common China-centered Eurasian economic space is created with the development of production in the Western China (first of all, Xinjiang Uygur Autonomous Region, or XUAR), Central Asia and the Asian part of Russia. With the manufactures located more in the west, the share of finished goods flowing to Europe by land as part of the OBOR initiative will be larger (the continental "Chinese" transit). At the same time, the bulk of today's cargo generated by the enterprises of the eastern (coastal) provinces of China has been and will still be transported to Europe by sea (since it is cheaper in any case while the time of delivery is crucial for only a limited part of goods). It is the sea "Chinese" transit.

Agree, in the context of the common China-centered Eurasian economic space, the prospects of ports (including Russian ones) look somewhat different as compared with those in the context of a land transit project.

It is clear that in the current situation, further development of the transport infrastructure of Russia (including the ports) will take place, on the one hand, amid the increasing budget deficit, and on the other hand, amid the growing competition for foreign trade cargo flows of Russia and China.

In this situation, I would like to draw your attention to some state support activities required in the Baltic Basin. In order to equalize the competitiveness of Russian ports (with that of the foreign ports), Russia’s four main ports in the Gulf of Finland (Ust-Luga, Big Port of St. Petersburg, Primorsk and Vysotsk) should be deep-water harbours to ensure accommodation and handling of vessels with maximum draft and displacement allowing for passing the Danish straits to/from the Baltic Sea. The budget deficit should not hinder or suspend the implementation of projects on the development of railway approaches to Russian ports in the Gulf of Finland (the completion of the Koshta-Volkhovstroy and Mga-Gatchina-Weimarn-Ivangorod projects as well as the implementation of the Savelovo-Sonkovo​​-Mga and and Vladimirskaya-Mozino-Taitsy-Bronka projects. In view of China and Chinese companies’ readiness to invest considerable funds in the development of transport infrastructure (including ports) outside China in the framework of the OBOR initiative, it is necessary to create a separate consistent program for the development of Russia's transport infrastructure and for attraction of Chinese cargo flows under the integrated EAEU and OBOR projects.